Economy
| Morning business news |
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| Written by Roberta Murray and Sharecast | |
| Monday, 27 October 2008 | |
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Monday 27th Oct: Ukraine to be bailed out and the Middle East is not immune.
The IMF Kuwait suspended trading in the shares of the nation’s second-largest commercial bank on Sunday, after it was revealed it had made losses as a result of derivatives, and moved to guarantee all local bank deposits. The central bank said it was appointing a supervisor to monitor Gulf Bank’s treasury management and monetary market activity. An inquiry into the bank’s losses would be made, reports the FT. Goldman Lloyd Blankfein, Goldman Sachs’ chief executive, called Vikram Pandit, his Citigroup counterpart, last month to discuss a merger, in a dramatic example of the secret manoeuvring that preceded the government bail-out of the financial sector. The call, which was made at the tentative suggestion of the regulatory authorities or at least with their blessing, was made shortly after Goldman had won surprise approval to convert itself from a securities firm into a commercial bank on September 21, according to several people familiar with the events, says the FT. Alistair Darling Alistair Darling is planning new targets for cutting borrowing and formal external oversight of the public finances as part of proposals to replace Gordon Brown’s fiscal rules. The chancellor will use Wednesday’s Mais lecture formally to scrap the rules introduced by Mr Brown when Labour came to power in 1997 and give the green light to higher levels of borrowing as the UK enters recession, writes the FT. Other market and economic news RAB Capital's energy fund, once worth more than a £1bn, has banned withdrawals by investors as it struggles with the fall in the price of oil and other commodities, according to the Independent. European companies are set to issue a wave of profit warnings in the coming months as earnings are expected to fall by about 40 per cent by the end of 2009. Executives at companies in continental Europe and the UK are increasingly gloomy about the prospects for 2009 and many expect a prolonged recession before a slow recovery starting in 2010, says the FT. British insurance companies will not be bailed out by the United States,The Times has learnt. It is understood that, although Henry Paulson, the US Treasury Secretary, was prepared to listen to appeals for cash from British and American insurers, he is adamant that US bailout funds will go only to “federally regulated financial institutions that lend money”. Pressure is mounting on the Bank of England for an emergency interest rate cut this week as the severity of the global downturn wreaks more havoc, according to the Times. Deloitte's corporate restructuring arm has been called in by two of the troubled high-street group Woolworths' biggest lenders ahead of discussion about the company's business plan and budget for next year, writes the Independent. Renewable energy and climate change targets for 2020 will be missed unless the National Grid speeds up the rate at which new generators are connected, leading industry figures have said, according to the Times. Highbridge Capital Management, which is majority owned by JP Morgan Chase and has $25bn under management, is axing 10 per cent of its New York-based staff and plans cuts in Europe and Asia, says the Telegraph. In what will come as a further blow to homeowners’ confidence, a survey released today shows that the average house price in the UK has now dropped to levels last seen more than two and a half years ago, with prices down 7.3 per cent on this time last year, reports the Independent.
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As the economy hits the most significant downward cycle in 50 years, finance directors must take stock of their companies' remuneration and compensation packages.